First, James "Jim Bob" Moffett, the chairman, president and CEO of McMoRan Exploration, is also chairman of Freeport-McMoRan. He's using Freeport money and stock to buy MMR, a wildcatting company that's drilling a gigantic well, the Davy Jones, in the Gulf of Mexico that's been disastrous so far for the company. MMR's been crushed by this 29,000 foot deep well in the Gulf of Mexico, which has had repeated delays and may turn out to be a total bust. If you owned MMR, you just got $14.75 in cash and 1.1 units of a Royalty Trust, giving you an almost $7 move on what had become a free-falling stock of late courtesy the missteps in the Davy Jones project.

The other portion, the buy of Plains Exploration, which has given you more than nine points of gains on a $36 stock, seems better because PXP recently bagged some good Gulf of Mexico properties from BP (BP). Still, Plains owns 31.5% of McMoRan and Plains' CEO, Jim Flores, is on the board of McMoRan.

These hardly seem like arm's-lengths deals, and while I have been recommending PXP because it picked off a prime property from a hobbled BP, I would never have thought that it was a hot idea to buy MMR, which recently plummeted by about 33% from $12 on a negative progress report from the Davy Jones well.

Just doesn't seem right to me -- it doesn't pass the smell test.

I like deals where the acquirer goes up, not down, and the positive acquirer action had been the hallmark of this era. The $50 a share in cash and stock Freeport's paying for Plains, a 39% premium to yesterday's price, is causing arbitrage pressure on FCX.

More important for Freeport shareholders, though, is the instant re-coloration of the stock they own. Freeport was supposed to be the premier copper company in the world. Now it is an oil and copper company, where I worry that maybe something's wrong with the copper side of the equation. Freeport's major overseas copper holdings are in the Democratic Republic of the Congo and Indonesia. Lately, the company's had dire problems with the government of Indonesia and with workers at its gigantic Grasberg mine. Plus, the ore's become harder to pull out lately, and it is of a lesser grade. And could the Congo be less stable than we thought?